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– by David Kozlowski

 

The Disney-Fox deal, and to a lesser extent the Time Warner-AT&T merger, will do serious harm to the entertainment industry, possibly leading to its long-term demise. Hollywood is changing before our eyes, as the six (soon to be five) major studios struggle to attract TV and film audiences, while also coping with the explosive growth of streaming services. These changes will ultimately result in fewer films, fewer jobs, and fewer experimental or high-risk projects going forward. The sad thing is, everyone’s seen this coming for years, but the majors have been way too slow to respond.

Hollywood has simply fallen out of step with modern culture; the industry is locked into roughly the same production-distribution-exhibition model that’s existed since the 1920s. Over the last few years, streaming services, cord-cutting, and mobile platforms have altered the way media is consumed, causing the majors to panic like a bunch of cornered predators. Too dramatic? Maybe, maybe not.

Related – Disney Acquires 21st Century Fox, Properties Like X-Men, Avatar, Fantastic Four

Millions of consumers have flocked to streaming and digital platforms rather than patronize traditional venues like theaters and TV, catching the majors entirely flat-footed. The majors are now responding with a bizarre fight or flight behavior that’s forever altering the entertainment landscape. (It’s corporate Darwinism on an epic scale).

The big question is: what does all of this mean and how does it affect our favorite properties and franchises? Let’s discuss!


The Majors Become A Pyramid With Disney At The Top

Way, way back in the 1920s Hollywood was ruled by the “Big Five” studios (20th Century Fox, Paramount, Warner Bros., MGM, RKO), who controlled production, distribution, and exhibition — known as “vertical integration,” which the government deemed anti-competitive. Today we have the “Six Majors” (20th Century Fox, Paramount, Warner Bros., Universal, Sony, Disney) who are essentially horizontally integrated — collectively, they own every aspect of the creative process and virtually every major franchise or property.

If Disney and AT&T complete their deals there will only be five major studios left standing; but realistically, Disney will be the grandmaster. Paramount, WB, Universal, and Sony are each struggling with major flops, declining franchises, and/or a variety of legal battles. Disney’s ownership of Marvel (with the exception of Spider-Man), Pixar, Lucasfilm, and Avatar is incredibly dominant — consider that Disney largely owns the Nov-Dec 2017 box office (Thor: Ragnarok, CoCo, The Last Jedi). Between Disney and Fox they own 11 of the top 20 films this year. Think about that for a moment. Going forward, Disney will drop a new blockbuster movie almost every other week of the year — we’re not far from that now!


Increased Focus On Blockbuster Film Projects

Fans of superhero, animated, and sci-fi films are getting all they can eat these days. Get used to it, because it’s rare for a non-blockbuster to secure a handful of screens for more than a week or two. Each major has their roster of franchises — some clearly stronger than others — and they’re going to keep pumping these films out until the math doesn’t work anymore… it’s unclear what happens when this occurs.

Unfortunately, audiences are tiring of the blockbuster formula, which is clearly contributing to audience frustration — just read the fan reviews of The Last Jedi on Rotten Tomatoes or Metacritic for proof. CG-laden spectacles are the norm, but how much longer will fans remain mesmerized? Gimmicks like 3D, VR, and MoviePass have limited appeal, but at least they’re trying to move the needle.


Fewer Movies Will Be Made Overall

The production costs for the average blockbuster film is over $150 Million (Justice League famously cost over $300M). Add to this the marketing costs, which are usually 1:1 with production budget, and you can see how challenging it is for these beasts to make money. In 2017 there were lots of major flops (King Arthur, Geostorm, Blade Runner, Valerian), creating giant revenue holes at the majors — and probably killing many smaller projects. Note that Disney doesn’t seem to have a flop problem, which must be terrifying for everyone else.

Even when a blockbuster nails it and has a huge opening weekend, it might only get a week or two of runway before the next blockbuster takes their lunch. The likely consequence is that the majors make fewer films overall with a greater emphasis on formula, CG, and spectacle. But what about Deadpool and Logan, you say? As excited as everyone is for the success of these two films, it’s not clear (yet) whether these are outliers (Venom, Hellboy, and Spawn will help clarify). Expect the major to take fewer risks going forward (unless the budgets are tiny).


Tens Of Thousands Of Jobs Could Be Lost

THR reports that the Disney-Fox deal could result in 5-10K lost jobs, as acquisitions of this size tend to create redundancies. Additionally, Fox had a number of projects in varying states of development, which may be killed, paused, or delayed for one reason or another (Alien, Gambit, Planet of the Apes).

It’s going to take 12-18 months for Disney and its subsidiaries (Marvel, Pixar, Lucasfilm) to decide what to do with all of these various Fox projects — if anything at all. Fox example, Marvel produces 3 movies per year, but the addition of X-Men, Deadpool, and Fantastic Four complicates things; can Marvel make 5 movies per year? If not, somethings got to give (sorry Gambit).

All of the cast and crew associated with these up-in-the-air projects will have to find other work, but as mentioned above, what happens when there are fewer projects to go around?


Expect A Major Shakeup Of Streaming Services

Netflix, Amazon, and Hulu are the big kids on the streaming playground. Disney is creating their own streaming service (debuting in late 2019), and it will be dominant out-of-the-box. CBS, HBO, DC, and others are pushing their own services too. The problem is, the average consumer won’t subscribe to more than 2-3 of these at a time. So, who survives?

Adding to the confusion, Disney already owns 30% of Hulu, and with the Fox deal they’ll own 60%. It’s hard to imagine that Disney launches their own new service while also owning a competing service. So Hulu is probably on the selling block. That said, it’s unclear whether the Disney service will contain mature and R-rated content, which means that a lot of Fox movies and series will need a home… so maybe Hulu still makes sense for Disney. It’s bananas, but this is the world we live in.


Conclusion

Streaming services are where the future wars of Hollywood will be fought. Sure, movie theaters and network/cable won’t go away overnight, but a reckoning is coming. Audiences simply aren’t returning to theaters or watching TV like they did in the 1950s, although the majors will continue abusing those avenues until the money dries up completely.

We’re seeing a serious contraction in the entertainment industry, and I don’t think it’s anywhere near over. It’s conceivable that survival will dictate more mergers and acquisitions; next year we could be looking at 4 or even 3 major studios and perhaps quite a few less networks and cable channels too. Change is normal, change is often good, but the kind of change happening in Hollywood seems very reactionary, and it’s not going to be good for a lot of actors, crew, execs, and fans.

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SOURCES: ComicBook , Forbes , The Atlantic , THR , Bloomberg

  • Moby85

    Most of these are good points, especially the focus on Blockbusters and less films due to their expense (mind you, with the high cost of theatre tickets I’m not wasting any tears). Where I might play Devil’s Advocate with you, David, is on the shakeup of streaming services. Yes, there will be a shakeup I agree – but that’s because of increased competition for Netflix from Disney. And honestly I don’t know what it’s like in the U.S. but up here in Canada Netflix is absolutely cranking us with at least tri-yearly $1/month price increases.

    Disney might break the monopoly, granted just in streaming, and might make Netflix lower costs which would be great because I own physical copies of Star Wars, the Marvel Films, etc. And I only stand to gain from a Netflix price freeze/cut in order to just watch their originals: which is the only reason I pay for Netflix currently.

    • Great comments, thank you!

      I agree that the streaming services are overpriced. There are simply too many of them today (with several more to come) to believe that they can all survive. The problem is that monthly Internet connections are very expensive, now add your phone, mobile, and cable bills, and finally on top of all that are the subscription fees for the streaming services.

      I have a hard time believing that most consumers will pay for more than 1 or 2 streaming services at a time (and Netflix and Disney are probably the two that most people will subscribe). For example, I might subscribe to HBO GO one month each year, just to binge everything I’ve missed.

      • Derek NOLA

        Amazon prime is a defacto third because most households dont view it as a real expense for streaming since its mostly for shopping and they just view it as lagniappe

        • Good point, I agree. I’ve been a Prime member for years, but I seldom watch Amazon Video. Anyone else having the same experience? Fortunately, Jean-Claude Van Johnson just debuted, which I really want to watch… other than that, not much.

          • Derek NOLA

            But Prime getting added to the apple tv is a big win for Prime because thats the main reason I didnt really watch their stuff.. i only have a fire tv in the living room, bedrooms are all apple tv

  • Victor Roa

    the fewer movie issue has already happened, Fox, WB and Sony in the past 20 years have a lot less movie since budgets tripled on tent pole productions. At least Disney seems to have a decent output because they stay on “brand.”
    The shift has already happen 4 years ago and I do feel that either films go on a diet or streaming services will be the savior to those films. Also corporate involvement can’t be involved into every theater chains, I really don’t like theater experience and if Disney is now forcing demand into theater chains like it’s trying to set up a toy shelf at target…. I only see like 5 films a year I do enjoy recently the Witch and What We Do In Shadows I saw in theaters and not on streaming. Disney isn’t the evil empire(talking with friends who worked with them on the development side) but they sure are doing everything they can to be one.

    • I worked for a video game company called Playdom, which Disney purchased in 2010 for $763 million. (A bargain!) The acquisition was a nightmare; teams were fighting/betraying each other to get their hands on Marvel or Pixar properties, existing projects ground to a halt, there was a hiring freeze, and eventually a lot of projects were killed and many people quit. Four years later Disney shut the whole studio down and laid 700 people off. To be fair, I’ve seen worse (looking at you Electronic Arts). Overall, in my experience such acquisitions cost jobs, creates stress, and can get really weird. Good luck Fox employees!

      • Victor Roa

        Yeah, I have a friend who worked on Marvel Heroes, he’s got stories to tell. But to be honest Disney’s video game work has been something they have been working on since the first Kingdom Hearts and NOW they are….. shutting down companies and trying to do something. It’s a weird mess, because they hire best of the best and for good money….. as in contract work (no health care), just they never release anything. Like for example for a Disney XD show Motorcity the team developed this insane plug in for head ritatuib which the Titmouse used to cut time down so then they could focus on more kinetic action sequences. And it’s all on Disney’s dime. Sure the show got canceled after 12 episodes because no one watches Disney XD but like this is money well spent plus it helps a small studio.
        But like I said, a friend of mine got out of Gazillion while working on Marvel Heroes really saw the writing on the wall….. as they shut down online servers 2 weeks ago. To be honest Fox still has a lot of studios that still make money, Simpsons, Family Guy, American Horror Story are going to be treated well. Its just like we keep seeing the Xmen stuff just on the verge of collapsing on ever other film, I mean how many years has Gambit in development? Thats guys being paid to not make a film, and it’s because some producer isn’t comfortable with trend number 35 in the industry.
        I mean there are elements in this disney deal where it can work, but yeah, totally some studios are going to get shut down because they have a bad business model.
        It’s obvious Disney’s video game venture is really how to see this deal end up.

  • Neil Pye

    I just want to know when Mulder and Scully are going to appear on Agents of SHIELD

    • You know, that’s not an entirely crazy idea. I would watch that show!

  • Derek NOLA

    I really need some clarity from Disney on the Hulu issue? thats the real confusion? why launch a new service when you have that one but also i dont see time warner, nbc or anyone else sticking around on a service dominated by disney? i could def see Hulu falling apart but the major problem and CBS all access proves this is people arent going to go and join a bunch of different services and we certainly arent going to go back to the sling model either as i just want content when i want it…. i think netflix will remain the dominant horse with amazon second because most people belong to prime for other reasons so they dont view it as a real extra streaming service.. who is the third one is up in the air… and HBO is going to have a huge hole in schedule when thrones goes off the air… also sports streaming is really going to fragment in my mind as I see all the major leagues launching their own services and not offering anything exclusive to the networks anymore…

    • Joseph Jammer Medina

      It’s likely a branding thing. With their Disney service, they likely want to skew more family friendly. Stuff that doesn’t fall into that can go Hulu.

      • Derek NOLA

        interesting point but so much of Fox isnt family friendly at all.. so that seems to contradict that.. my thought it disney should launch a service with everything they own on one tier the adult version and one for kids only thats cheaper.. like how netflix has two tiers but this one being for content instead

  • Kronx

    I don’t disagree, but Fox is selling assets for a reason. Not buying them could be even worse for jobs, etc.

    • Derek NOLA

      Ultimately, I think Murdoch saw the writing on the wall and that is the goliath that Disney has become but also without superheroes and other major tentpoles the cinema is dead. Network tv is dying too.. if you dont have streaming options then your out of luck and as we said before there will be two or three major streaming services that people will pay for .. everything else will lose out or be pirated.. so they made a call to sell now and get the most value out of it to continue focusing on programming thats more live tv in nature.. i can def see Fox Network really becoming the reality tv network with sports and some news … reality tv (games shows and the like) really seem to thrive on live tv and they are of course much cheaper to produce

David Kozlowski is a writer, podcaster, and visual artist. A U.S. Army veteran, David worked 20 years in the videogame industry and is a graduate of Arizona State University's Film and Media Studies.